King declares quantitative easing programme may be extended
King declares quantitative easing programme may be extended
Tuesday 23rd February 2010
The governor of the Bank of England Mervyn King has said the emergency £200 billion quantitative programme may be restarted due to concerns over the weakness of the eurozone.Appearing before the Commons Treasury select committee on Tuesday, Mr King said while the UK economy had "embarked on a process of healing" recovery would still take some time.
He was asked by MPs what would make the Bank consider injecting yet more money into the economy after its monetary policy committee voted unanimously to halt the scheme.
He replied: "My particular concern at the moment derives from the health of the global economy, and in particular our major trading partner, the eurozone."
Recent figures from nations such as Germany have shown some economies in Europe, having left recession, have now stagnated. The continent is also continuing to suffer from the dire state of Greece's financial system.
During his evidence session, Mr King warned lending between the major banks may not as significant as he would like in the coming months.
"We would like to get back to a situation where the banking sector can expand its lending, but I am not sure that is going to happen until we have seen further consolidation in the balance sheets of the banking sector," he said.
"There's still quite a way to go on that front."
During the governor's time in front of the committee, the pound fell more than 1.2 cents against the dollar from $1.5539 to $1.5413.
Mr King though attempted to ease fears ratings agencies could be considering downgrading the UK's triple-A status.
The Conservatives have warned Britain could be on the verge of losing its top rating as a result of the country's budget deficit.
Mr King countered, claiming: "I don't believe the rating agencies are concerned, in the sense that they are not re-rating the UK and I would be very surprised if they were to do so."
He refused to be drawn into the ongoing political debate over when would be best to start spending cuts, instead claiming the programme had to continue through the lifetime of the next parliament.
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